CANADA FX DEBT-C$ firms in light pre-Christmas trade

Wed Dec 24, 2014 9:41am EST
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* Canadian dollar at C$1.1610 or 86.13 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    OTTAWA, Dec 24 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Wednesday as market
participants booked profits in the U.S. currency ahead of the
Christmas holidays.
    The loonie was expected to stick to a tight range with
volume dwindling as the session progresses. Canadian and U.S.
bond and equity markets will be open for only half the day.
Canadian markets will be closed on Thursday and Friday for the
Christmas and Boxing Day holidays. 
    A slight decline for the U.S. dollar against a basket of
currencies helped the Canadian dollar, which has tumbled
in recent months in the face of plunging oil prices and broad
investor favor for the greenback.
    "It's a little bit of profit-taking, maybe a little bit of
positioning-squaring heading into holidays, and not really a
thematic play," said Camilla Sutton, chief currency strategist
at Scotiabank in Toronto.
    The Canadian dollar was at C$1.1610 to the
greenback, or 86.13 U.S. cents, slightly stronger than Tuesday's
close of C$1.1630, or 85.98 U.S. cents.
    Still, the morning's gains were minuscule compared with the
rout of the Canadian dollar over the past six months as the
currency has fallen with the price of oil, a major Canadian
export. It has shed 8.5 percent for 2014, putting it on track
for its worst year since 2008.
    Analysts expect the Canadian dollar will weaken further as
2015 gets underway. With the U.S. Federal Reserve likely to
raise interest rates next year, investor appetite for the U.S.
dollar is set to be renewed to the detriment of the loonie.
    "While we're in the period of very strong U.S. dollar flows,
I think it's still a story of a weak Canadian dollar," Sutton
    "I think the story does settle in the second half of the
year when we see how the impact of a strong U.S. economy and the
weakness we've already seen in the Canadian dollar help to
offset oil prices."
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 3 Canadian
cents to yield 1.070 percent and the benchmark 10-year
 down 18 Canadian cents to yield 1.925 percent.

 (Editing by Peter Galloway)